Industry-wide Sustainability Index Will Help Managers Compete, Says Cornell Study
Two factors summarize the expenses from five hotel accounts
A team of three researchers has developed a standard measurement of expenses for energy and supplies that can be used as a sustainability gauge for the hotel industry. The researchers, Jie Zhang and Nitin Joglekar, of Boston University, and Rohit Verma, of Cornell University, explain their measurement in a new report from Cornell's Center for Hospitality Research, “Developing Measures for Environmental Sustainability in Hotels: An Exploratory Study.” The report is available at no charge from the center at http://www.hotelschool.cornell.edu/research/chr/pubs/reports/2010.html.
“Looking at the hotel chart of accounts, we see that managers have to analyze expenses in at least five areas of their operating statement to get a sense of their energy and resource use, which affects their operation’s sustainability,” said Zhang, a doctoral candidate at BU. “We analyzed operating-statement accounts for 984 U.S. hotels over the span of 2001 to 2008 to develop a scale that would apply to all hotels, regardless of chain segment. We compared the expenses as a percentage of revenue per available room, to develop a normalized scale. Managers need only plug their cost figures into the measurement to see where they stand.” Data were supplied by PKF Hospitality Research, which has data from hotels’ operating statements data back to 1936.
The result of this analysis was two factors. One factor includes linen, laundry, and supplies from both the rooms and F&B operations. This factor is termed the behavioral factor, because it is heavily influenced by guests’ activities—particularly if they participate in linen reuse programs. The other factor, termed the operating factor, is more subject to management control. This factor includes expenses for electricity, water and sewer, and maintenance, from several accounts in the Uniform System of Accounts for the Lodging Industry.
With this analysis, managers can compare their sustainability scores on these two factors against their competitors and also over time, to see the financial effects of a hotel’s sustainability efforts. For example, hotels operated by the franchise brand or chain tended to have lower resource use than did hotels operated by third-party management firms. The factor analysis also quantified the additional expenses incurred by hotels that offer food and beverage service.
Meet and interact with Professor Verma, an active member of the executive education faculty at the School of Hotel Administration, when he presents sessions in the Professional Development Program: http://www.hotelschool.cornell.edu/industry/executive/pdp/.
Thanks to the support of the CHR partners listed below, all publications posted on the center's website are available free of charge, at www.chr.cornell.edu.
About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 79 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The center also publishes the award-winning hospitality journal, the Cornell Hospitality Quarterly. To learn more about the center and its projects, visit www.chr.cornell.edu.
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